Tuesday, August 31, 2010

According to § 31 of the Sales Agency Act a request for severance compensation must be lodged within one year from the termination of the agreement, which is consistent with the EC directive regulating. The provision is mandatory in the sales agent's favour, thus a shorter limitation period is not allowed.

This post concludes the series of posts on severance compensation to sales agents under Swedish law.

Monday, August 30, 2010

30 § of the Sales Agency Act deals with the right to severance compensation, if the agent terminates the contract himself. The provision is mandatory to the sales agent's benefit and is based Article 18 of the EC Directive.

The agent is entitled to severance compensation only if
1. the termination is due to a circumstance attributable to the principal enabling the sales agent to terminate the agreement with immediate effect according to § 26 of the Sales Agency Act, or
2. because of the agent's age or illness or similar circumstances, the sales agent cannot reasonable be required to continue his activities.

As regards the first paragraph it should be noted that it includes termination due to breach of contract as well as termination "due to an important reason". Compare the commentary on § 29 above.

If the sales agent is a company or other legal entity, the second paragraph of the provision may be invoked in case of old age, sickness or death of centrally placed executives in the agency company.

Thursday, August 26, 2010

According to § 29, the sales agent is not entitled to severance compensation, if
1. the principal has terminated the agreement because the agent's breach of contract, provided the sales agent has acted intentionally or recklessly;
2. the agency agreement is terminated by reason of the agent's bankruptcy, or
3. the sales agent and the principal agree to transfer the agency to another party.

The provision is mandatory for the sales agent's favour in that the sales agent does not need to accept less advantageous conditions than those prescribed by law.

It should be noted that the requirements of 29 § paragraph 1 are narrower than those on the right of early termination due to breach of contract (according to § 26 of the Act), which is a direct departure from the EC Directive. This means that upon termination by the principal as a result of the agent's breach of contract, the sales agent may still be entitled to severance compensation. It should further be noted that the principal’s termination "due to an important reason" does not deprive the sales agent of his right to severance compensation.

The provision does not require that a termination for breach of contract is actually performed. It is, however, that the agency relationship is terminated by ordinary dismissal or by appointment in close connection to the breach of contract by the sales agent.

Tuesday, August 24, 2010

According to the Swedish Sales Agency Act 28 § Agent is entitled to severance compensation (“avgångsvederlag”) when the agency agreement ceases if and to the extent
1. the sales agent has provided the principal with new customers or has significantly increased trade with the existing group of customer and the principal will derive a significant advantage from such development, and
2. severance compensation is reasonable, given the totality of the circumstances, and particularly the loss to the agent of in respect of contracts with the customers mentioned in the first paragraph.

The severance compensation shall not exceed an amount equivalent to one year's remuneration, calculated at an average during the last five years or during the period in which the sales agent performed the agency, if shorter.
This provision is mandatory for the sales agent's benefit and is based in Article 17 of EC Directive (86/653/EEC).

In calculating the severance compensation the agent's saved operating costs shall be taken into account. Circumstances which could affect whether severance compensation shall be paid and the size of the compensation are i.a.
• the length of the contractual relationship
• the size of investments by the sales agent
• the sales agent's work efforts
• the sales agent's success in the market.

Should the sales agent decline an offer of an extension of a fixed-term contract or if the sales agent starts to sell competing products following the termination of the agency agreement, this may reduce his possibility to obtain compensation. Competition prohibitions applicable after the termination of the agreement may, on the other hand, have a positive effect on the possibility of the sales agent to receive a substantial compensation.

Monday, August 23, 2010

As I quite often get questions about the rules on severance compensation to sales agents, I will briefly cover the current rules in some coming blog posts.

Questions concerning agents are governed by Act (1991:351) on sales agency, usually referred to as the Sales Agency Act. Paragraphs 28-31 deal with issues of severance compensation to the sales agent in connection with the termination of an agency agreement.

* 28 § of the Sales Agency Act sets out the basic terms of when and under what conditions a sales agent is entitled to severance compensation * 29 § of the Sales Agency Act sets out provisions about when severance compensation is not payable to the sales agent * 30 § of the Sales Agency Act covers severance compensation when the sales agent himself has terminated the agency agreement * 31 § of the Sales Agency Act establishes the time requirements for demands of severance compensation

One very important thing to remember is that the sales agent is not bound by contractual arrangements which are less favourable to him than the provisions of paragraphs 28 through 31.

In my next post I will present the contents of § 28 of the Sales Agency Act.

Friday, August 20, 2010

I have received a question if a foreign (i.e. non-Swedish) lawyer may draft the Sale and Purchase Contract in respect of Swedish real estate.

My answer was roughly as follows:

There is no formal requirement that a Sale and Purchase Contract should be drafted by a Swedish lawyer. There is actually no requirement at all regarding who is entitled to draft the Sale and Purchase Contract. Even if it is most common that the real estate agent involved drafts the contract, it could be drafted by the parties themselves or by a third party.

However, I would assume that a Swedish seller would be hesitant to sign a Sale and Purchase Contract drafted by a foreign lawyer. In addition I am not sure that a foreign lawyer would be sufficiently acquainted with applicable Swedish law relating to transfer of real estate to safe guard her or his client as buyer.